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Hutton says tax relief not his territory

Labour conference: Paul McMillan reports from Manchester

Work and Pensions Secretary John Hutton is remaining tight-lipped about possible Government moves to amend pension tax relief.

At an Investment management Association and Social Market Foundation fringe meeting at the Labour conference last week, Hutton responded to questions on scrapping tax credits on dividends for pension funds and SMF calls for an overhaul of tax incentives, saying it was not his area.

He said: “I do not think talking about tax relief is my territory and I am not in a position to comment widely on the role of tax incentives.”

SMF director Anne Ross-iter said the Government should be considering the post-Turner world and foc-using on changing a system which is “potentially regressive and favouring the better off”.

Rossiter said the SMF would be conducting research into the possible red-istribution of incentives which will also look at how short-term savings vehicles can contribute to long-term saving.

She said that although tax incentives for Isas encourage people to save in the vehicle, it is unclear how the incentives affect the amount that is saved overall.

Hutton rejected suggestions that scrapping tax credits on dividends for pension funds had been largely responsible for current pension problems, saying the Tory description of a “£5bn raid on pensions is nothing but propaganda”.

This view was backed up by IMA chief executive Richard Saunders, who said the effect was probably nearer £1bn and other factors, such as falls in equities, were far more responsible.

Hutton also looked to play down the danger of levelling down of existing schemes caused by the NPSS, saying the Turner-style rolling review will guard against this prospect.

This follows calls for the Government to safeguard existing pension provision, with all defined-benefit schemes and defined-contribution schemes with equal or greater contributions probably exempt.

Saunders attacked industry critics of the NPSS, saying they were keen to talk about potential damage to existing provision but they had no other answer to a future pension crisis.

He said: “I challenge critics in the industry as to what they would do instead but they have no reply and, if they do, they suggest that the Government should contribute more, which would raise tax levels.”


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